Merkel, Hollande to unite in tough message for Greece

BERLIN Thu Aug 23, 2012 6:18am EDT

France's President Francois Hollande (R) and Germany's Chancellor Angela Merkel attend a ceremony in Reims Cathedral, July 8, 2012. REUTERS/Francois Nascimeni/Pool

France's President Francois Hollande (R) and Germany's Chancellor Angela Merkel attend a ceremony in Reims Cathedral, July 8, 2012.

Credit: Reuters/Francois Nascimeni/Pool

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BERLIN (Reuters) - Angela Merkel and Francois Hollande will present a united front towards Greece at talks on Thursday, telling Athens not to expect any leeway on its bailout agreement unless it sticks to its terms.

The German and French leaders are meeting to fine-tune their message to Greek Prime Minister Antonis Samaras, who begins a charm offensive trip to Berlin and Paris on Friday in the hope of persuading Europe's big powers that Greece deserves patience.

Samaras has been giving interviews to German media stressing that while Athens may seek more time to meet austerity targets, it was not asking for more money from partners. But German Finance Minister Wolfgang Schaeuble sounded a stern note.

"More time is not a solution to the problems," Schaeuble told German radio, addressing Samaras' hopes that his country might be given four years instead of two to push through painful economic reforms, to alleviate the impact on the Greek people.

Schaeuble warned that more time could also mean "more money" and added that Europe's help for Greece had already "gone to the limits of what is economically viable".

European leaders say any decisions on Greece will depend on a report next month on its progress by a "troika" of EU, European Central Bank and International Monetary Fund inspectors.

Merkel receives Samaras on Friday and Hollande receives him on Saturday, at a moment of rare optimism on financial markets that the European Union - especially the European Central Bank - is poised for decisive action on the euro zone debt crisis.

Merkel herself poured cold water on hopes for far-reaching concessions on Wednesday, saying during a trip to Moldova that she was "going into these talks with the awareness that we have to achieve that every partner sticks to his commitments".

But behind the stern public message, Berlin and Paris may have little choice but to give Samaras what he called "a bit of air to breathe". There is little appetite in either capital for forcing Greece out of the euro zone.

AFTER MERKOZY

Merkel and Hollande will try to project confidence they can go some way towards replicating the "Merkozy" alliance that gave the euro zone some semblance of unified leadership under Hollande's predecessor Nicolas Sarkozy.

The Franco-German axis has been strained by Hollande's calls for more measures to stimulate growth, a rebuff to Merkel's strict agenda of austerity.

"It's not just about balancing budgets, although we must hold to that, it's also about growth," French Prime Minister Jean-Marc Ayrault said of Hollande's visit.

Some German officials say Merkel's relationship with Hollande is off to a rocky start, which might explain why they will give only a brief statement at 7 p.m. (1700 GMT) before they meet, rather than a full news conference after their talks.

As she prepares to campaign for a third term in power in 2013, in a country where the media is taking an increasingly tough line with Greece, she cannot cede too much to Samaras - or to Hollande's new French Socialist government, which is allied to her main domestic opponents, the Social Democrats.

With German patience wearing thin after repeated requests for financial help from Greece, Spain, Portugal and Ireland, Merkel is under pressure to defend taxpayers' interests while also upholding the stability of the currency.

After Hollande managed to weigh down Merkel's European pact for budget responsibility with pro-growth measures, Merkel will be watching closely his attempts to meet his own deficit targets with spending cuts and tax measures, German officials say.

"If Hollande gives up on his targets because of rising domestic political resistance, we can hardly expect more painful reforms from states like Italy or Spain," said one government source in Berlin, speaking on condition of anonymity.

Still, both leaders aim to show unity on Greece. One Hollande aide said the president "has always maintained it is indispensable for Greece to respect its commitments, while at the same time it should be given hope for growth".

There are signs that Merkel's conservatives, if not ready to postpone reform targets, may also find ways to be flexible if the troika finds Athens is broadly in compliance.

"With Greece, we cannot change the cornerstones of the aid package or tamper with the principle of conditionality. But I can imagine we could adapt certain things within that framework such as interest rates or maturities on credit, like we already did with the first package," said Norbert Barthle, a member of parliament from Merkel's ruling centre-right coalition.

Jean-Claude Juncker, head of the Eurogroup of euro zone finance ministers, said Greece was staring at its "last chance" to avoid bankruptcy. A decision to grant more time would depend on the findings of the troika.

"As far as the immediate future is concerned the ball is in the Greek court," he said on a visit to Athens. "In fact this is the last chance and Greek citizens have to know this."

(Additional reporting by Brian Love, Catherine Bremer, Sarah Marsh and Alexandra Hudson; Writing by Stephen Brown; Editing by Peter Graff)

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